“How do I reach new customers” is a thought on every ecommerce shop owner's mind. With privacy changes in Apple’s IDFA and Facebook targeting greatly affecting reach, ecommerce stores have felt the effect on their finances, seeing much lower returns than a year or two previously. New strategies, particularly those that rely on existing customers and first-party data are more valuable than ever for ecommerce stores as a sure-fire way to reach new customers while keeping CAC (customer acquisition costs) low.
Potential customers rely on word of mouth more than paid media. In fact, 74% of consumers say recommendations from people that they know are the key driver of their purchasing decision. Your DTC ecommerce store can take advantage of this by launching a customer referral program. To read more about the benefits of a referral marketing program for your Shopify store, check out last week’s blog here. To learn how to launch one successfully, keep reading.
From a 2020 study, referred customers are not only more loyal, but also have a higher LTV (lifetime value), and also spend more. Referred customers are also more likely to buy, about 30% more likely, so you save time and money.
One of the best parts about referred customers is that because they came from a referral, they are 4x more likely to refer the brand themselves if they are satisfied with their purchase. This exponential growth is the reason so many brands have started their own referral programs.
People like to make recommendations, it’s in our nature. About 70% of customers who had a positive experience with a company would recommend that brand to other people so it’s not hard to activate your customer base if your product and customer experience are good.
There are different types of referral programs you can create, the structure for programs can be different, and so can the incentives. Incentives are key - 41% of Gen Zers will refer a friend to a product just to qualify for a reward, and because Gen Z and young millennials are much more sensitive to price and hold lower brand loyalty than previous generations, this is a key tactic for your product to have reach across different generations.
Okay so this one is sort of a pre-step but if you don’t have satisfied customers, you won’t have enough of a base to activate your referral program. A person’s referral of your product is a stamp of approval of your brand and their personal endorsement so you need to live up to expectations and provide a product that is either unique or blows competitors out of the water in one way or another.
Similarly, people like to know that a brand continues to be there for them, even after the purchase has been made. Ensure your customer support team is well trained on the technical aspects of your product and know how to service your specific customers’ needs. Lastly, timely and polite communication is imperative to build a rep worth repping.
Why are you setting up a referral program? Do you have a new product launching you want to get people talking about? Do you want to drive awareness of your brand in a highly competitive market? Do you want to get people to sign up for a free trial? Whatever your goals for this program, be sure they are specific and measurable.
Increasing sales can be a goal but you need parameters to know when your campaign is successful. Setting your goal to be more specific and measurable, for example, selling 25% more monthly subscriptions than the previous quarter, gives you a number to aspire to and measure so you can track your progress.
Specific goals are also important because they help keep your work focused on one thing at a time. Yes, increasing all sales would be great, but by choosing to focus on one type of product or area, you are able to actually see the return on your investment instead of trying to guess what worked and why.
How will you motivate your customers to participate in your referral program? As a rule incentives should be both desirable and achievable in order to garner the most participation.
The type of business and product you have will most likely influence the type of rewards that make the most sense for you to use in your incentive program. While monetary rewards are often everyone’s first thought, products and other incentives can also be just as enticing and that can be a benefit to you since your COGS (cost of goods sold) for a product would be lower than the product’s price tag.
Some types of rewards that are the most popular:
These are just some of the reward options possible. If you’re not sure which is the right one for you, talk to your best customers - the repeat buyers and the ones who post about you on social media without incentive. Ask them what they would like to see in a referral program.
This is mentioned a bit above but we will explore the different ways you can set up your referral program. If you plan on using an app to help you run and manage your program, what you decide here will limit the apps that can help you as many are set up for just one or two types of structures. The type of products you offer and your campaign goals will also inform your structure so be sure to keep those top of mind when reading through the below information and deciding on an option.
This is where many different referral apps come in and we’ll do a review of our favorites for each reward structure in an upcoming blog, but for now, let’s go over the basics that you’ll need to decide on, regardless of whether or not you use an app.
Make sure all of this information is straightforward, easy to understand, and easy to do. Remove any points of friction - they should be able to sign up right then and there with a big Sign Up Now button and be able to start referring (or executing the other requested actions) immediately. This means one-click referral links that can be shared in the ways that work best for your referrers, and even a referral widget where email addresses can be entered and the rest is automated.While there are undoubtedly many other things you may with to share with your program participants, you can do so on a FAQ page, or if you’re using an app, the home page for the referral program.Likewise, potential referees want to know what their benefit is for accepting the referral - both the product benefit and the referral reward. Be sure to template both in any standard referral message you give your referrers to use.
If you need inspiration for your own ecommerce referral program, check out this list of 50 different examples. We’ll be back next week for the final blog on this subject where we’ll be covering all of our favorite referral apps and the pros and cons of each.